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Video: GM announces layoffs as auto sales tank

DETROIT — Consumers frightened by the prospect of losing their jobs stayed away from auto showrooms again in January and sent U.S. car and truck sales falling 37 percent, a familiar refrain for the struggling industry but an unwelcome start to a critical year for U.S. carmakers.

Devastated by an economy in which few people have the spare cash to buy a car or can obtain the financing to do it, Chrysler’s domestic sales for January were less than half what they were a year earlier.

Sales fell 49 percent at General Motors and 40 percent at Ford. Toyota and Nissan’s sales each fell at least 30 percent.

“How many ways can you say disaster?” asked Aaron Bragman, an auto industry analyst with the consulting firm IHS Global Insight in Troy, Mich. “That’s across the board. It’s not unique to one company.”

With January’s drop, the industry’s sales have declined for 15 straight months when compared with the same month in the previous year. There hasn’t been a year-over-year increase since October 2007, when light vehicle sales rose a paltry 1 percent, according to Autodata Corp. and Ward’s AutoInfoBank.

The industry’s sales of 656,976 vehicles, compared with just over a million in January 2008, translates to a seasonally adjusted annual sales rate of 9.57 million, according to Autodata. That’s the worst performance since June 1982, when the nation was mired in a recession.

Huge declines in low-profit fleet sales to rental car companies made January an exceptionally bad month, even though automakers said they were encouraged that retail sales appeared to be stabilizing after four straight months with an industrywide sales plunge of at least 30 percent.

“If you’re starting from an extremely low point, pretty much anywhere you go is up,” said Bragman, whose company has predicted annual sales for this year of 10.3 million, down from last year’s 13.2 million and 16.1 million in 2007.

But executives anticipated a treacherous beginning of 2009 before the market improves.

George Pipas, Ford Motor Co.’s top sales analyst, wasn’t sure whether 15 months of industrywide sales declines is a record, but if it is, it won’t last long.

“I can tell you that it’s only going to last for one month,” Pipas said, predicting year-over-year declines until perhaps later in the year. Then, he said, with only a small increase, sales should surpass the dismal levels seen at the end of 2008.

U.S. automakers will need sales to improve if they want their turnaround plans to be successful. After receiving $13.4 billion in federal loans to stay afloat, General Motors Corp. and Chrysler LLC have said they are basing their plans on industrywide sales this year of 10.5 million and 11.1 million vehicles, respectively.

But few people were expecting the automakers to start 2009 at such a pace. January is typically a slow sales month, and the market isn’t likely to improve until the second half of 2009 as economic stimulus efforts take effect and access to credit improves.

The hefty incentives automakers have rolled out have done little to boost sales. Chrysler has been offering employee pricing, zero-percent financing and up to $6,000 in rebates on its vehicles, and GM said it will launch another zero-percent financing with the help of the $5 billion in federal aid its financing arm, GMAC, received late last year.

The biggest dent last month was in fleet sales — big volume sales to rental car companies and municipalities — which fell sharply in January as production slowed or was shut down at many U.S. auto plants for most of the month.

GM said its fleet sales fell 80 percent to just over 13,000 vehicles in January, marking their lowest sales level since 1975.

“The overall fleet business, rental car companies are holding their inventory, probably double to triple what they were a couple years ago in terms of their turn rates,” said Mark LaNeve, GM’s North America vice president of sales, services and marketing. “There is a definite lack of demand.”

Chrysler said its January fleet sales fell 81 percent from year-ago levels. Ford said fleet sales fell 65 percent, but the decline in the automaker’s retail sales had stabilized.

“What we’re looking for is stabilization. You have to stop falling before you can start rising,” said Emily Kolinski Morris, Ford’s top economist.

Chrysler attributed part of its 66 percent drop in car sales and 49 percent decline in truck sales to a shortage of affordable credit for its customers, noting that the $1.5 billion federal loan for its financing arm wasn’t received until the second half of the month.

One of the few large automakers to post a sales increase was South Korea’s Hyundai Motor Co., which posted a 14 percent gain. Hyundai credited its offer that covers a new vehicle’s depreciation for customers who want to return a car because they lost their job.

“This program gets to the root cause of today’s economic concerns — fear of job loss,” Hyundai regional general manager Peter DiPersia said in a statement.

Subaru posted an 8 percent sales increase from a year earlier, its second-straight month of sales gains.

The Associated Press reports unadjusted auto sales figures, calculating the percentage change in the total number of vehicles sold in one month compared with the same month a year earlier. Some automakers report percentages adjusted for sales days. There were 26 sales days last month, one more than in January 2008.

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